1. At the instance of the Commissioner of Income-tax (hereinafter referred to as ' the Commissioner ') the Income-tax Appellate Tribunal, Nagpur Bench, Nagpur (hereinafter referred to as ' the Tribunal '), has submitted Under Section 256(1) of the I.T. Act, 1961 (hereinafter referred to as ' the Act '), a statement of the case for the opinion of this court on the following question of law :
' Whether, on the facts and in the circumstances of the case and considering the lease deed in particular, the CIT's action under Section 263 is justified '
The assessee was a private limited company which was running its business in loss. The assessee, therefore, leased out its premises to a Calcutta firm which was carrying on its business under the name ' Raipur Flour Mills ', on a monthly rent of Rs. 5,000. The assessment year was 1973-74. The amount of rent recovered by the assessee was treated by the ITO as ' Income from property ' Under Section 24 of the Act. The ITO, therefore, by his order dated November 30, 1973 (annex. B), allowed Rs. 10,903 as one-sixth deduction Under Section 24 of the Act for repairs on the premises let out to M/s. Raipur Flour Mills (Calcutta). On a perusal of the order of the ITO, the Commissioner was of the view that the ITO had erroneously allowed one-sixth deduction for repairs and that the said order was prejudicial to the interests of the Revenue. The Commissioner took action Under Section 263 of the Act. After considering the explanation of the assessee, the contents of the agreement of the lease deed and the letters of the ITO and those of the assessee, the Commissioner by his order dated September 2, 1975, set aside the order of the ITO dated November 30, 1973, by holding that it was the Calcutta firm which was supposed to carry out the repairs of the building and not the assessee, and, as such, the ITO had erroneously allowed the deduction of Rs. 10,903 as cost of repairs. The Commissioner directed the ITO to make a fresh assessment according to law. The assessee preferred an appeal before the Tribunal against the said order of the Commissioner. The Tribunal, on the basis of a letter written by the Calcutta firm, came to the conclusion that the claim of the assessee was well founded and the finding reached by the Commissioner was erroneous, and therefore, set aside the order of the Commissioner holding it to be unjustified. The Tribunal also clarified that the assessee did not rely on Section 24(1)(i)(b) but the assessee's case wasunder Section 24(1)(i)(a). It is under these circumstances that the Tribunal has referred the aforesaid question of law for our opinion.
2. A reading of Sub-section (1) of Section 24 of the Act makes it clear that a fixed allowance of a sum equal to one-sixth of the annual value is allowed where the property is either, (a) in the occupation of the owner, or (b) it is let out to a tenant and the owner has undertaken to bear the cost of repairs. In case the tenant undertakes to bear the cost of repairs, the excess of the annual value over the rent payable for a year by the tenant is deductible, subject to a ceiling of one-sixth of the annual value.
3. It is an admitted fact that the assessee had leased out the premises on a monthly rent of Rs. 5,000 by executing the deed of lease dated November 11, 1968, (annex. A). A reading of Sub-clause (e) of Clause (2) of the said lease deed will go to show that it was the responsibility of the lessee to keep the demised premises under repairs and in good condition during the continuance of the tenancy and that it was also the responsibility of the lessee to bear all current expenses for the seasonal repairs of the building and the structure, except repairs in case of fire, storms, flood, earthquake or any natural calamity affecting the demised premises. In view of this clear term in the deed of lease, it was not necessary at all to refer to the letters of the ITO seeking clarification or the replies thereto submitted by the assessee or the Calcutta firm in order to determine the undertaking of repairs of the demised premises during the relevant period for purposes of deduction Under Section 24 of the Act. The contents of the said letters neither had any significance nor any value in the presence of a written deed of lease, the terms of which regarding responsibility of repairs are very much clear. It is abundantly clear from the terms of Sub-clause (e) of Clause 2 of the deed of lease that it was the responsibility of the lessee, the Calcutta firm which had undertaken to keep the premises under proper repairs and in good condition and to bear the cost of all seasonal repairs during the continuance of tenancy. In these circumstances, there was no question of any clarification by letters when the deed of lease itself, clearly and in quite unambiguous terms, speaks of the liability of the lessee as to the repairs of the demised premises. In view of these facts and circumstances, there was no question of any deduction being allowed to the assessee Under Section 24 of the Act and the Tribunal was clearly wrong in setting aside the order passed by the Commissioner.
4. In view of the aforesaid conclusions, we answer the question in the affirmative, in favour of the Department and against the assessee. There will be no order as to costs.